When times are tough, it’s important to remain rooted in best practices. KPIs are crucial to reaching business objectives and ensuring your goals are at the front of mind and inform daily decision-making. To optimize effectiveness (and not waste your time), choosing the right KPIs for your dental practice is the key to success.
KPIs help eliminate ambiguities by setting definitive milestones that can be broken into weekly, monthly, or quarterly objects. To be effective, KPIs should be SMART— Specific, Measurable, Achievable, Relevant, and Timely.
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The metrics you choose should promote the actions you want your employees to carry out and align with your strategic targets. Once you’ve selected your KPIs, they need to be communicated to your team and tracked on an ongoing basis.
When you’ve implemented some procurement best practices and established some purchasing history, you’ll have the data you need for informed, strategic decision making. Now it’s time to analyze the data so you can select your KPIs.
Here are a few KPIs focused on procurement and inventory targets you may want to focus on:
Suppose you have a fairly consistent demand for a critical dental supply. In that case, you’ll want to avoid any large spikes and significant drops and achieve a constant flow of material that coincides with production needs. The average inventory KPI estimates the average on-hand inventory at any given time period.
Rate of Inventory Turnover
The rate of inventory turnover measures the rate at which your stock is replaced and helps you keep an eye on how much obsolete stock you may be carrying. For items consumed regularly, you’ll want to make sure you’re not impeding your cash flow by ordering too much or risking stockouts by ordering too little. This KPI will help you ensure you are getting it “just right.”
Disorganization or mismanagement of dental supplies is an often faced concern for dental practices. Damaged, lost, or perishable goods with a limited shelf life are all causes of inventory write-offs. Monitoring this with a KPI allows you to keep an eye on the costs and work towards limiting your losses with improved organization and procurement best practices.
First-Time Match Rate
The three-way match process is essential to validating the data that supports the payment of an invoice. This ensures you are invoiced and pay the price your suppliers committed to, that your supplier’s documents align, and that your purchase orders are being entered correctly.
Discrepancies in data between a purchase order, packing slip, and invoice are hugely time-consuming. Monitoring with the first-time match rate KPI allows you to dig into root causes and establish processes that lower your cost per transaction, have solid procurement controls, and end-to-end efficiency.
Spend Under Management
The spend under management KPI is well suited for DSOs or stand-alone dental practices with maturing procurement processes. If you’re in transition from transactional purchasing habits to strategic procurement strategies with preferred suppliers, or if you’ve implemented an order approval process, the spend under management KPI will help you drive cost savings, reduce maverick spend, and improve profitability.
Cost savings is perhaps the most obvious KPI for managing costs and “hard savings” initiatives. The cost reduction KPI measures your historical pricing to your current performance for the same good. Alternatively, if you have awarded a new vendor business, you can compare the costs of purchasing from one supplier against another.
If you’re going to choose only one supply chain metric, let it be this one. Monitor supply chain performance and begin holding your suppliers accountable with the perfect order KPI. Assess your vendors’ service levels by monitoring their deliveries are on time, in full, damage-free, and accurately documented and invoiced. This KPI supports your three-way match process, safeguards your business continuity by ensuring your suppliers are trustworthy and guards your profits by making sure you pay what you should, for what you got.
How Method Can Simplify the Process
Leveraging procurement data analytics to monitor key performance indicators gives you the foundational measurements you need to ensure you are moving in the right direction, finding areas for potential improvements and gaining the advantages you work hard for.
Contact us today to see a demo of our dental inventory management software and get a feel for the data you can leverage to streamline your procurement processes!